Are dividend-paying mutual funds a good investment?

Investors looking for dividend income may find dividend-paying mutual funds a better bet than individual stocks, as the latter aggregates the available dividend income from multiple stocks. A mutual fund also helps with diversifying risk from depreciating stock prices since the invested money is spread among dozens of companies.

Do mutual funds pay dividends?

Most mutual funds hold at least some stocks that pay a dividend. Because of that, they collect some dividend income that must be distributed to investors on a proportional basis at least once each year. However, some mutual funds specifically focus on owning stocks that pay dividends, especially those with a high dividend yield.

What is a dividend fund or ETF?

A dividend fund or ETF holds a significant amount of dividend-paying stocks. A dividend fund collects the dividends it gets from its stock holdings, then distributes them to shareholders based on the number of shares owned. Using dividend funds, investors can generate steady income from stable, profitable companies across a range of industries.